- Measuring self-control problems: a structural estimation
- Number of pages
- Tilburg: Netspar
- Netspar Discussion Paper
- Volume | Edition (Serie)
- DP 01/2009-002
- Document type
- Faculty of Economics and Business (FEB)
- Amsterdam School of Economics Research Institute (ASE-RI)
We perform a structural estimation of the preference parameters in a buffer-stock consumption model augmented with temptation disutility. We adopt a two-stage Method of Simulated Moments methodology to match our simulated moments with those observed in the US Survey of Consumer Finances. To identify the parameters we use liquid and quasi-liquid (retirement) wealth holdings at different ages as target moments. We find evidence of a significantly positive degree of temptation, and estimates under the unrestricted model are more precise than estimates under the restricted model with no temptation. Overall, a model with temptation preferences explains better the observed target moments.
JEL classification codes: D91; E21; G11.
Keywords: temptation disutility; method of simulated moments; non-liquid
assets; consumption-saving behaviour; life-cycle models.
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